BIR Ruling [DA-172-99]

March 19, 1999 BIR RULING [DA-172-99] Gregorio Araneta University Foundation Victoneta Avenue Malabon, Metro Manila Attention: Dr . Manuel D . Punzal, Ph . D . President Gentlemen : This refers to your letter dated October 1, 1998 requesting for exemption from the payment of capital gains tax on your sale of a piece of land, together with the improvements erected thereon, the proceeds of which was allocated and used for the expansion program of the Gregorio Araneta University Foundation (GAUF). It is represented that GAUF is a non-stock, non-profit organization; that on April 25, 1998, a Deed of Absolute Sale was executed by and between the GAUF, as Seller, and Spouses Isidro and Josefina Callangan, as Buyers, involving a real property together with improvements thereon in the total sum of One Million Three Hundred Thousand Pesos (P1,300,000.00); that Spouses Callangan desire to have the title to the said property transferred in their name by the Register of Deeds of Malabon; that as a prerequisite, Spouses Callangan must secure the necessary Tax Clearance from the local Revenue Office; that all the proceeds of the sale of the property by GAUF to Spouses Callangan have been allocated and used for the construction of and/or improvements of the Golden Pavilion Building; that the Golden Pavilion Building is an expansion program of your Institution where the service offices of the Registrar, Business and Finance, Accounting, Cashier, Treasurer, External Relations, Security and Internal Auditor are now presently located; and that the Pavilion also houses a multi-purpose recreational center for the students and personnel of the University. In reply, please be informed that this Office is of the opinion that your sale of the subject parcel of land with the improvements erected thereon is exempt from the capital gains tax considering that the income derived therefrom did not result from the productive use of real properties but from a single transaction which is merely incidental to the purpose for which your Foundation was organized. Hence, the said income is not within the contemplation of the last paragraph of Section 30 of the Tax Code of 1997. (BIR Ruling No. 115-92 dated April 2, 1992) The aforesaid opinion has been sustained and adopted by the Court of Tax Appeals in CTA Case No. 1468 dated October 14, 1968 (Congregacion de la Mission de San Vicente de Paul). Accordingly, the profit or income resulting from the sale transaction would be merely incidental to the purpose for which your Foundation was created. (BIR Ruling No. 115-92 dated April 2, 1992 and Opinion of Secretary of Justice, GC No. V-287 dated April 7, 1959) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Ruling No. 381-97 dated November 13, 1997) prLL Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)